Gold: Prediction for the price of gold: XAU/USD Pares Away, Attention Turns to Fed Speakers Before CPI

Nov 7

VOT Research Report

Analytics and Considerations

• Gold prices follow Fed policy.
• Fed speakers lay the foundation prior to a crucial CPI release.

FUNDAMENTAL Background FOR XAU/USD

After Friday’s reaction to U.S. Non-Farm Payroll (NFP) data, markets priced in a less hawkish Federal Reserve, and gold is trading down on Monday as a result. Money markets predict that the terminal rate will rise to 5.1% in June 2023 (from 5%), but the way to just get there has been cautious as a result of Jerome Powell, the chair of the Federal Reserve.

Fed speakers have dominated news stories in the days leading up to the U.S. inflation print on Wednesday, starting with the Fed’s Collins previous Friday who noted the need to limit inflation despite encouraging indicators in some sectors.

Economic Activity

When examining 10-year real rates, which are shown below, they appear to be slowing down around the 4.15% level. Some gold bulls may find comfort in the historical inverse link among gold and real rates, but much will depend on the inflation reading this coming week. The Fed’s favored gauge of inflation, core inflation, has risen over the past two months even while headline inflation has been falling. Should this remain true, both releases, which are anticipated to be less robust for October, could offer gold upward support.

10-YEAR REAL YIELD FOR THE US TREASURY

Technical View

Gold continues to trade below the 200-day SMA but remains within the downtrending channel on the long-term weekly chart. With a close above the 1682.29 (38.2% Fibonacci) resistance handle opening up ensuing resistance zones, this week’s candle closure is crucial for providing future guidance. The Relative Strength Index (RSI) is still close to oversold zone, indicating that the yellow metal has restricted upside.

Daily Moving Averages

Technical Indicators